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sec 40A (3)

Page no : 3

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

Ok. But here I am not talking about capital expenditure. Depreciaiton is not capital expenditure.

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

Dear Friends,

Just now I emailed Vinod K Singhania, I got the reply that depreciation will be disallowed if any asset is purchased for more than Rs 20000 in cash.

Max Payne (employed) (2569 Points)
Replied 07 April 2010

Dear Praveen,

We saying depreciation is not a revenue expenditure either.... it is an allowance..

The literal construction is that the deduction wil not be allowed in respect of expenditure....

pls confirm the same from the act sec 32 and 40A(3).....

 

Can you forward the mail to me....

My mail id has been sent by PM to you....

 

Would also be grateful, if u could ask Singhania Sir my doubt as well...

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

Hey, I have forwarded the mail. Please check.

swati (Article) (72 Points)
Replied 08 April 2010

Forward me too pls. My E mail ID is swati2489 @ gmail.com

Naga Praveen (Chartered Accountant) (304 Points)
Replied 08 April 2010

hey i got only one word reply from singhania

Max Payne (employed) (2569 Points)
Replied 08 April 2010

Hi praveen,

 

Yea i got the "its correct" mail, but when i tried to open it a second time,

it said the mail could not be displayed properly..... :(

 

But its gr8 to get a forward from Dr Singhania himself....!!

karthikeyan.v (Chartered Accountant) (523 Points)
Replied 08 April 2010

hi every one

karthi

swati (Article) (72 Points)
Replied 08 April 2010

 

Hey thanx Praveen

I think at last i got my answer....Thanks again

Naga Praveen (Chartered Accountant) (304 Points)
Replied 08 April 2010

You are welcome.

Rajat Singhal CA,CS,CFA (Senior Manager (F&A)) (249 Points)
Replied 08 April 2010

The said section refers to expenditure incurred by the assessee in respect of which payment is made. It means that all outgoings are to be brought under the word expenditure as per the decision in Attar Singh Gurmukh shah Vs. CIT (1991) 191 ITR 667. Depreciation not being an expenditure, rather an allowance, and there is no outgoings on account of depreciation from the assessee concerned, my view is depreciation on assets purchased in cash does not come under the purview of section 40A(3) of the Income tax Act,1961.

Naga Praveen (Chartered Accountant) (304 Points)
Replied 08 April 2010

Hi brother once read page 399 para 148.3 point 4 of Taxmann`s Direct Taxes by Singhania

Naga Praveen (Chartered Accountant) (304 Points)
Replied 08 April 2010

In Taxmann`s Direct Taxes by Vinod Singhania for AY 2010-11 for CA Final, page 399 para 148.3 scope of Sec 40A(3), point 4 it is given as follows-

"Provision of Section 40A(3) does not apply in respect of an expenditure which is not to be claimed as dedution under sections 30 to 37. For instance, if an assessee gives donation in cash(eligible for deduction under section 80G), section 40A(3) is not applicable, since donation is not deductible under sections 30 to 37 but under section 80G. Conversely, if payment in excess of Rs 20,000 is made(otherwise than by account payee cheque or draft), then deduction under sections 30 to 37 in respect of such payment is not available. For instance, if any assessee purchases a depreciable asset(say, a car) for Rs 3 lacs by making payment in cash, depreciation(i.e., 15 percent of Rs 3 lakh), which is otherwise deductible, will be disallowed under the provisions of section 40A(3)."

Hope everything is clear now.

Naga Praveen (Chartered Accountant) (304 Points)
Replied 08 April 2010

If any one has different views please post here.

Deepak (Article Assistant) (27 Points)
Replied 09 April 2010

 

But as per point no 2 of Circular 34 dated 05.03.1970

"The provisions of section 40A(3) would apply in computing the income under the heads Profits and gains of business or profession and Income from other sources as per section 58(2). All payments in excess of Rs. 2,500 at one time whether for goods or services obtained for cash or credit, which are deductible in computing the income, have to be made by crossed cheque or bank draft. Thus, the price of goods purchased for resale or use in manufacturing process or payments for services will be covered by the provisions of section 40A(3). However, the section will not apply to repayment of loans or payment towards the purchase price of capital assets such as plant and machinery not for resale."

https://law.incometaxindia.gov.in/TaxmannDit/DispCitation/ShowCit.aspx?fn=https://law.incometaxindia.gov.in/directtaxlaws/cbdt/dtccontents/PARA0379.htm


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